Pound Sterling Forecasts vs the Euro and US Dollar: Exchange Rate's Momentum Favours the £
- Written by: Gary Howes
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Near-term exchange rate forecasts confirm positive momentum remains behind the pound sterling against the euro and US dollar.
Wednesday saw the GBP fall back agaisnt the EUR and USD but welcome climbs are being seen against the AUD and NZD. Part of the weakness has been attributed to the Bank of England whose April MPC minutes were expected to be more bullish.
However, consolidative action on Thursday confirms the UK currency tends to show weakness in short doses and further climbs should not be counted out.
Nevertheless, today's price action could be seen as a blip, Tuesday saw the the British pound (GBP) exchange rate complex trade on the front-foot; a lack of UK economic news-flow will see traders keep an eye on technical levels and momentum indicators when basing their currency market decisions.
For GBP, a range of indicators suggest momentum will remain positive with one commentator even suggesting sterling is the currency that "keeps on giving."
(Be aware that the quotes here are taken from the mid-markets; your bank will affix a spread to the rate at their discretion when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering up to 5% more currency. Please learn more here.)
Pound sterling to US dollar exchange rate forecasts
OCBC's Emmanuel Ng says:
"The BOE MPC minutes this week may shed more light on the authority’s perceived policy posture relative to the market’s reckoning of the first rate hike.
"In recent sessions, we note that the market’s confidence remains palpable with the GBP-USD’s ability to continue to skate near the 1.6800 vicinity.
"In the interim, a 1.6730-1.6845 range may prevail and we stay supported on the pair."
UBS say:
"The important resistance focus is at 1.6878. A break above this would extend the uptrend to 1.7043. Support is at 1.6661."
Euro pound exchange rate forecast
"With the trending and momentum indicators pointing lower, there’s potential for extension of the downtrend to critical support at 0.8158. Resistance is at 0.8260," say UBS.
Pound euro exchange rate forecast
Turning the currency pairing around, analysts at Investec say the pound euro is a pair that keeps giving:
"At the moment the pound is the currency that just keeps on giving. With GBPUSD and GBPEUR sitting on recent highs it represents an excellent opportunity to look at long term cover. By using a six month Forward Extra euro buyers can protect a worst case rate of 1.20.
"If, when the deal matures the spot rate for GBPEUR is above 1.20 and hasn’t traded at or above 1.2705 during the month of expiry, you will be free to buy your euros at the spot rate. If the market has traded above 1.2705 you will be obliged to trade at the original rate of 1.20."
Markets: Bank of New York Mellon reports Q1 results
Keeping an eye on the prevailing equity market conditions we note a positive start to the trading week.
Mike van Dulken, Head of Research at Accendo Markets, gives us the following break-down:
"FTSE 100 trading back from highs of 6670 of late Friday after a breakout above 6600 fuelled by US equities pushing higher with investors taking a positive view on US Q1 corporate earnings, macro-economic data (bad weather behind us), US monetary policy outlook and news from Geneva on Ukraine increasing appetite for risk (technology rebounded) and dampened that for safehavens such as Gold.
"Overnight, US extended last week’s gains (longest winning streak for S&P500 since Oct) during Europe’s Easter absence and amid a light day for trading volumes, macro-data, news and corporate results.
"While the US Conference Board Leading Indicator accelerated more quickly in March, the Chicago Fed Nat. Activity Index pulled back as expected.
"Overnight, note the agreement to ease tensions in Ukraine showing signs of crumbling as the US and Russia trade blame during meetings keeping things just as tense as they have been for weeks.
"In focus today, we have a quiet start data-wise to this the shortened week with nothing of note until late morning when Bank of New York Mellon reports Q1 results. Before the US market opens we also have the likes of McDonalds, Xerox, Lockheed Martin, Travelers, Comcast and United Technologies."